I filed as a non-resident in 2005 and got a state tax refund of $525. I itemized my deduction in 2005 though my total deduction is just this state tax of $525 which was less than the standard deduction.
What's the tax status of my 2005 state tax refund for
Thanks.
>
>
>
>
>
>
>
>
>
You received a "tax benefit" from the deduction (even if less than the standard deduction would have provided), therefore the refund is taxable on your 2006 return.
As a nonresident alien (NRA) you were not entitled to a standard deduction. Thus your standard deduction was zero, making the state income tax you deducted more than your standard deduction. The tax benefit doctrine governs the taxability of state income tax refunds. Since you received a tax benefit on your 2005 federal return from having deducted your state income tax and in 2006 you recovered the full amount of state income tax paid the prior year, the refund is taxable on your 2006 federal return. Frederick Lorca
Have something to add? Share your thoughts — no account required.
Ask the community — no account required